Fischer Bros. v. NWA, Inc.

117 F.R.D. 144, 1987 U.S. Dist. LEXIS 14160
CourtDistrict Court, D. Minnesota
DecidedAugust 11, 1987
DocketCiv. No. 3-87-106
StatusPublished
Cited by1 cases

This text of 117 F.R.D. 144 (Fischer Bros. v. NWA, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fischer Bros. v. NWA, Inc., 117 F.R.D. 144, 1987 U.S. Dist. LEXIS 14160 (mnd 1987).

Opinion

ORDER

JANICE M. SYMCHYCH, United States Magistrate.

The above matter came on before the undersigned on July 29, 1987 upon plaintiffs motion to amend the complaint. Plaintiff and the assignees of its cause of action were represented by George Wood, Esq. Defendant Northwest Airlines was represented by Frank Costello, Esq. and Paul Dinger, Esq. Defendant Simmons was represented by Charles Lentz, Esq. and Thomas Evans, Esq.

PROCEDURAL AND FACTUAL BACKGROUND

This action was commenced on February 17, 1987 by Fischer Bros. Aviation as plaintiff. Under various legal theories, including antitrust claims under the Clayton and Sherman Acts, Fischer Bros, asserts that it was damaged in its five-year exclusive contractual arrangement to provide certain commuter “airlink” services for Northwest, when, in 1986, Northwest merged with Republic Airlines. Simmons had a contractual commuter services arrangement with Republic prior to the merger. According to the complaint, Northwest selected Simmons as its exclusive commuter airlines, and then terminated Fischer. It also alleges that Simmons had earlier offered to purchase Fischer Bros, for $3.3 million. The offer was withdrawn, according to the complaint, in conjunction with Northwest’s termination of Fischer.

On May 26, 1987, for the sum of $15,000.00, Fischer Bros, assigned its rights under this cause of action, in a formally executed agreement, to William R. Fischer, Betty L. Fischer, Montford R. Fischer and Bonita G. Fischer, who had been the sole shareholders of the corporation. The corporation was then sold exclusive of this cause of action, in a stock purchase agreement to Midway Airlines, for the sum of $2.235 million. The plaintiff here asserts a claim for $50 million in damages, as well as punitive damages and trebling under the Sherman Act. Midway Airlines, as part of its purchase of Fischer Bros., determined not to pursue the relief to which Fischer may be entitled under the lawsuit.

Pursuant to FRCP 25(c), the four Fischers, as assignees, seek to be substituted as plaintiffs. Defendants oppose the motion, challenging the validity of the assignment.

DISCUSSION

Defendants urge that the motion be denied on the grounds that the assignees may not properly pursue the antitrust claim, that the assignment was not a valid, arms-length transaction, that the assignment fails for want of consideration, that the assignment is champertous, and that the assignment is violative of 28 U.S.C. § 1359. They assert that to allow these assignees to pursue this claim would be tantamount to allowing any stranger to purchase such a claim on the open market. They argue that the assignees today have no present relationship to Fischer Bros., and that they therefore have no legitimate interest in this litigation. They assert that Fischer Bros, as a subsidiary of Midway Airlines in its merged capacity, or in whatever capacity it presently exists, is the entity that ought to be making the decision whether to pursue the claim. In recognition of that, argues the defendants, the court should exercise its discretion to require the case to proceed in the name of the original plaintiff.

It is true that determination of a motion for substitution of parties under Rule 25(c) [146]*146falls within the sound discretion of the trial court. Froning’s Inc. v. Johnston Feed Service, Inc., 568 F.2d 108 (8th Cir.1978); Otis Clapp & Son, Inc. v. Filmore Vitamin Co., 754 F.2d 738 (7th Cir.1985). For the following reasons, the court has concluded that the motion to substitute the assignees should be granted.

First is the threshold question whether an antitrust claim, which properly belongs to the corporation, and not to its shareholders, may be assigned to former shareholders upon sale of the corporation. It is recognized that the trebling action belongs to the business entity claiming harm from unlawful antitrust activity, and that individual shareholders may not pursue such claims or recover therefore, except upon distribution of an award made to the corporation. Peterson Motors, Inc. v. General Motors Corp., 613 F.Supp. 887 (D.Minn.1985). The rationale, in part, is to prevent multiple litigation from the same incident. The problem presented here is not whether the Fischers may, as shareholders, pursue the claims, but whether as assignees, they may do so. As a matter of federal law, assuming a valid assignment, an antitrust claim may be assigned. Health Care Equalization v. Iowa Medical Society, 501 F.Supp. 970, 977 (S.D. Iowa 1980), and cases cited therein; and Louisiana Farmers’ Protective Union v. Great A & P Tea Co., 131 F.2d 419 (8th Cir.1942). In neither of those cases was the assignee a shareholder of the corporation alleged to have been wronged. But, in both cases, the assignees, as associational organizations, would not have had standing to bring the antitrust suits absent their rights under the assignment. For the same reasons, the assignees here, although once shareholders of the plaintiff corporation, are not barred by virtue of that fact, from pursuing their assigned rights. Accord, Bonjorno v. Kaiser Aluminum & Chemical Corp., 559 F.Supp. 922 (E.D.Pa.1983), cert. denied, — U.S. —, 106 S.Ct. 3284, 91 L.Ed.2d 572 (1986); and Juneau Square Corp. v. First Wisconsin National Bank of Milwaukee, 445 F.Supp. 965 (E.D.Wis.1978).

The next question presented by the parties is the underlying validity of the assignment. It is necessary to reach this issue to determine, within the meaning of Rule 25 and 17, whether the individual Fischers are the real parties in interest, whose substitution as plaintiffs should be allowed. After litigation has been commenced, any transfer of interest is governed by Rule 25. Froning’s Inc., at 110.

Defendants attack the assignment as a sham transaction, wonting for consideration and collusively designed to sustain the jurisdiction of the court over the federal claims. They cite Martin v. Morgan Drive Away, Inc., 665 F.2d 598 (5th Cir.), cert. denied, 458 U.S. 1122, 103 S.Ct. 5, 73 L.Ed.2d 1394 (1982), for the proposition that the law of the state in which the assignment was made must be applied to test the validity of the assignment. The assignment here was made in Ohio, and all parties were residents of Ohio. Plaintiff has cited only Minnesota law on the subject of assignment validity.

Without making a choice-of-law determination for the case, it is quite clear that the precept of contractual consideration is the same in both Ohio and Minnesota. E.g. C & D Investments v. Beaudoin, 364 N.W.2d 850 (Minn.Ct.App.1985) and Mosney v. Green, 4 Ohio App.3d 175, 446 N.E.2d 1135 (1982).

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117 F.R.D. 144, 1987 U.S. Dist. LEXIS 14160, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fischer-bros-v-nwa-inc-mnd-1987.